BHP Billiton has approved the $US4.2 billion ($4bn) construction of the Caval Ridge coking coalmine in Queensland and expansion of the nearby Peak Downs mine, as it tries to ramp up output by 80 per cent by the end of the decade.
BHP, by far the world's biggest coking coal exporter, appears to have kept to a $4bn budget and timetable for Caval Ridge that was flagged in a 2009 revision to its plans.
This is despite surging costs for labour and equipment in Australia's booming resources sector.
Originally, BHP had been looking to bring on Caval Ridge this year, but the global financial crisis led it to peg back its expansion plans. First production is now due in 2014.
BHP coal chief Hubie van Dalsen said further expansion projects were being planned.
"This is a continuation of BHP Billiton's strategy of investing in large, low cost, expandable mines with long lives," he said.
The project will mine eight million tonnes of coking coal a year, 5.5 million tonnes at Caval Ridge, southwest of Mackay, and 2.5 million tonnes a year more at the nearby Peak Downs.
At Caval Ridge, the miners will all be fly-in, fly-out workers, under an agreement reached with the Queensland government. At the smaller Peak Downs expansion, the miners will be locally based.
BHP had wanted to use fly-in, fly-out workers for the whole project, but pared back its plans after a local outcry and talks with the state government. Quarterly reset prices of coking coal, which is used in steelmaking, have slid from record amounts of about $US330 a tonne earlier this year, when Queensland's floods restricted supply.
The decline -- to still historically high levels of about $US280 a tonne -- come as BHP and other Queensland producers return to normal production rates after the floods and as steelmakers in China destock.
The work approved yesterday is at mines owned by the 50:50 BMA joint venture between BHP and Japan's Mitsubishi, meaning BHP's share of the project cost will be $US2.1bn.
In March, BHP flagged plans to grow production from its coking coal unit, which made $US4.7bn in earnings before interest and tax in 2010-11, by 80 per cent between now and 2020. BHP produces about 37 million tonnes a year of coking coal from Queensland and the Illawarra, in NSW, not including the joint-venture partners' share, but has plans to increase this to about 68 million tonnes.
Other projects BHP will target are the Saraji East and an expansion of the Goonyella mine in Queensland. It will also expand its private Hay Point coal terminal at Mackay. There is the prospect of a two million tonnes a year expansion at Caval Ridge/Peak Downs, which BHP described yesterday as a "rapid, low cost expansion".
Caval Ridge will be an open-pit mine using a dragline, which is a giant shovel used to move big quantities of earth to reach coal seams.
On top of its expansion projects, BHP is also considering building its own railway to help haul its coal in Queensland. At the moment it uses QR National's track and haulage operations.
(sourced The Australian)